5 things you should know about ABLE accounts

In June of 2016, the first states began to offer ABLE accounts, a new type of tax-advantaged savings account for Americans with significant disabilities.

ABLE Accounts were created by the Achieving a Better Life Experience Act of 2014 so that Americans with disabilities and their families can build savings. Contributions of post-taxed dollars can be made by anyone including the beneficiary, family, and friends. While the contributions are not tax deductible, withdrawals and investment income earned from ABLE accounts will not be taxed.

If you are considering an ABLE account for yourself or a loved one, here are five things you should know:

Luckily, some states, but not all, will allow ABLE accounts to opened by non-residents. Details of the ABLE programs will vary state to state, including fees and investment options, so this allows families to choose the account that works best for them.

2. Anyone can contribute to an ABLE account, but there are financial limits

Contributions to ABLE accounts can be made by anyone including the beneficiary, family, friends, neighbors, etc. There is, however, an annual limit of $14,000 for each individual contributor.

The total limit of contributions to an ABLE account will vary by state, and many have indicated it will be over $300,000. But for recipients of Supplemental Security Income, there are some limitations. Continue reading to learn more about benefit eligibility.

3. ABLE accounts will not impact your eligibility for benefits

One of the primary purposes of ABLE accounts is so individuals with disabilities and their families can build savings without losing eligibility for critical benefits such as healthcare. Many public programs have asset limits of $2,000, which can force individuals with disabilities to sacrifice income and savings.

4. ABLE account funds can be used for any expense related to living with a disability

ABLE account savings can be used tax-free to cover a broad definition of expenses related to living with a disability. This can include basic living expenses, education, assistive technology, hiring personal care attendants, accessible housing, healthcare costs, transportation, and much more.

Eunice Diaz, a teacher in Colorado Springs, had been noticing a pattern. Despite the fact that she and her husband were “making good money,” they were spending their entire earnings and “were still struggling at the end of the month.”